Cable-backed anti-muni broadband bill advances in North Carolina

Is North Carolina's new broadband bill about creating a "level playing field" …

The North Carolina bill is called the "Level Playing Field/Local Gov't Competition" act, intended to "protect jobs and investment by regulating local government competition." Opponents call it just the opposite—a cable industry-backed proposal intended to make it almost impossible for cities to build their own broadband networks.

Whatever you call it, H129 passed the state's House of Representatives on Monday 81 to 37. Its sponsor, Marilyn Avila (R-Wake), told WRAL TV that the legislation would protect businesses from "predatory" local governments that want to build their own ISPs. "We have to have some sort of framework that everybody understands when you go into this," she explained. "This bill is going to establish those rules."

Baloney, responded Rep. Bill Faison (D-Orange). The law will "make it practically impossible" for cities to provide a "fundamental service," he insisted. "Let's be clear about whose bill this is. This is Time Warner's bill."

Limitations

Let's be even clearer about what is at stake in this fight. Muni networks are providing locally based broadband infrastructures that leave cable and telco ISPs in the dust. Nearby Chattanooga, Tennessee's city owned EPB Fiber Optics service now advertises 1,000Mbps. Wilson, North Carolina is home to the Greenlight Community Network, which offers pay TV, phone service, and as much as 100Mbps Internet to subscribers (the more typical package goes at 20Mbps). Several other North Carolina cities have followed suit, launching their own networks.

In comparison, Time Warner's Road Runner plan advertises "blazing speeds" of 15Mbps max to Wilson area consumers. When asked why the cable company didn't offer more competitive throughput rates, its spokesperson told a technology newsletter back in 2009 that TWC didn't think anyone around there wanted faster service.

When it comes to price per megabyte, GigaOm recently crunched some numbers and found out that North Carolina cities hold an amazing 7 of 10 spots on the "most expensive broadband in the US" list.

So what appears "predatory" to Avila might look like "competition" or even "faster, cheaper service" to others. In any event, here's what's in the legislation. Some of it seems reasonable. Other parts have us scratching our heads.

Below the cost

Avila's law wouldn't entirely apply to existing municipal ISPs, but it would completely apply to new ones. The reasonable bits include requirements that city plans to build a municipal network be accompanied by plenty of public hearings, open process, and opportunities for private companies to offer counter proposals. Projects seeking to provide service to "unserved areas" also get greater leeway. The general philosophy of the bill seems to be that any muni broadband network launched by a city ought to make a profit.

Interestingly, the law stipulates that new city ISPs must make it easy for private providers to use their ducts and conduit. The city service must provide "nondiscriminatory access to private communications service providers on a first-come, first-served basis to rights-of-way, poles, or conduits owned, leased, or operated by the city unless the facilities have insufficient capacity for the access and additional capacity cannot reasonably be added to the facilities."

Then comes this strangely worded provision stipulating that a muni network:

Shall not price any communications service below the cost of providing the service, including any direct or indirect subsidies received by the city-owned communications service provider and allocation of costs associated with any shared use of buildings, equipment, vehicles, and personnel with other city departments.

Apparently intended to prevent unfair competition from tax-subsidized business, the rule would actually put public networks at a disadvantage; private networks have long been able to offer "loss leader" offers and intro pricing to get people to sign up, and the large ISPs can all use profits from one area to subsidize below-cost prices in another.

Then there's this requirement for how muni ISPs must calculate their "cost":

The city shall, in calculating the costs of providing the communications service, impute (i) the cost of the capital component that is equivalent to the cost of capital available to private communications service providers in the same locality and (ii) an amount equal to all taxes, including property taxes, licenses, fees, and other assessments that would apply to a private communications service provider, including federal, State, and local taxes; rights-of-way, franchise, consent, or administrative fees; and pole attachment fees.

Beyond city limits

The proposed law goes so far as to require the network to pay to the city's general fund the same as "all taxes or fees a private communications service provider would be required to pay the city or county in which the city is located."

Note that the bill stipulates that cities would pay all taxes "that would apply" to a private provider, not the actual taxes that the relevant providers pay.

Finally, the proposal would limit any new service to "within the corporate limits of the city providing the communications service." Some communities, like Chattanooga, have made a big push to expand vital fiber optic lines into their surrounding rural communities; the North Carolina bill would prevent this.

The bill has been so controversial that cities like Asheville and Raleigh, the state capitol, have passed resolutions urging the bill to be voted down. Raleigh's resolution asked the General Assembly to "promote competition by curtailing predatory pricing practices that are used to push new providers and public broadband services out of the market" and to "reject any legislation similar to the Level Playing Field bills that would have a chilling effect on local economies and would impede or remove local governments' ability to provide broadband services, including WiFi, to enhance economic development and improve the quality of life for their citizens."

North Carolina's state Senate must now decide whether to pass H129 and send it to the governor's desk. Previous attempts at passing a bill like this have failed, but the state now looks quite close to turning the idea into law.

Interestingly, the law stipulates that new city ISPs must make it easy for private providers to use their ducts and conduit. The city service must provide "nondiscriminatory access to private communications service providers on a first-come, first-served basis to rights-of-way, poles, or conduits owned, leased, or operated by the city unless the facilities have insufficient capacity for the access and additional capacity cannot reasonably be added to the facilities."

While this would be a great thing for competition, it smacks of private companies using taxpayer money to build out their infrastructure. For any area where Time-Warner is not yet deployed, they can wait for the local muni to pay to lay conduit, and then they can cheaply run their service over that. Again, while that's not a bad thing, what I have an issue with is if the local muni wants to serve people that are already served by TW they cannot share TW's conduit -- they have to pay to lay their own.

"Level Playing Field/Local Gov't Competition", sounds like "Fair and Balanced" to me.

Yeah Time-Warner did their damnedest to make sure no other cities could start their own broadband service when they wrote this bill. However, check this out, its the last part of the section quoted in the article:

Quote:

In calculating the costs of the service the city may amortize the capital assets of the communications system over the useful life of the assets in accordance with generally accepted principles of governmental accounting.

Governmental accounting? LOL! So if a city wants to take a page from the feds they can just decide that their equipment will last forever and amoritize the costs over a 1000 years, right?

Seriously though, as a resident of NC, I hate the way this bill is written and really hope it gets voted down.

The only thing I'll accept from the proposed bill as reported here is the mandatory public meetings being held prior to any municipal network being built. But when it gets right down to it, if the public want to fund a better, cheaper, faster network for their area (regardless on how big that area may be), then they have that right. Taxpaying citizens have every right to choose to put their money to public works. We see that all the time with public transportation methods, public school funding, and dozens of other projects. This is no different.

To ban the citizens from choosing where to put their money if they vote a majority on wanting to fund it, that should be illegal. Bills like this are removing rights from the citizens as much or more than they are the local municipalities.

Anyone footing bills such as this should be forced into a very public audit on where their funding and donations come from. I'd bet we'd see a private ISP name or two on there.

Before the teatards show up with the whole "big government" spiel, take a look at Time Warner's 10k and then the annual budgets of the kinds of towns who have commonly implemented free municipal broadband for residential use (as opposed to putting up some wifi access points in the center of town). The only "big government" here is the state, if this law passes.

Seriously? Really? It's pretty f'ing brazen to write you're own monopoly legislation and have the paid off legislators debate the issue. Why stop there? Why not quit paying taxes to the government and just dish out cash directly to the corporations? Open you f'ing wallet to every asshat media outlet and telco and let them fight over who can grab the most. What the fuck is going on lately?

Before the teatards show up with the whole "big government" spiel, take a look at Time Warner's 10k and then the annual budgets of the kinds of towns who have commonly implemented free municipal broadband for residential use (as opposed to putting up some wifi access points in the center of town). The only "big government" here is the state, if this law passes.

Any private entity seeking to use muni-provided infrastructure should be able to do so, as long as they also open their own infrastructure according to the same rules. They can't have their cake and eat it, too.

Cherlindrea: "To ban the citizens from choosing where to put their money if they vote a majority on wanting to fund it, that should be illegal." Hopefully the citizens can keep from allowing such a ban to appear on the books. Corporate interests too often seem to completely overshadow and trample the interests of the general population.

Internet access is a service I can see being considered a public 'utility' right along with sewer, water, trash collection, but the citizens must be free to decide whether that's how they want it or not.

Chattanooga has one of the most advanced fiber networks in the country and most Chattanooga businesses will tell you that EPB's network is crucial for our community to keep a competitive advantage .Here is a very recent article of a company that just located in Chattanooga where the CEO said "We decided on Chattanooga because of the availability of high-quality employees combined with the robust telecommunications and data infrastructure available in the area."

That GigaOm article is truly shocking to me as a NC citizen. I will add though that AT&T U-verse just came out last week here in the Raleigh area. I'm torn as to whether to switch. The advertized speeds are definitely higher, and higher per dollar. But for internet only, there is a $250 start-up fee. I can avoid the start-up fee if I get U-verse TV, which I don't want for one because my TiVo would become trash. Second, AT&T is the devil. But then again, TWC is also the devil. What to do...

ISPs suck, period. But here's how I one up them - keep switching! All major ISPs have "introductory offers" for 6 or 12 months. Comcast comes out with best 12 month offers in summer. Get the service, switch to another ISP when intro period is over. It is a little bit of hassle, but I save about $400 a year just on internet, ~$1000 a year if I bundle services.

Any private entity seeking to use muni-provided infrastructure should be able to do so, as long as they also open their own infrastructure according to the same rules. They can't have their cake and eat it, too.

Time-Warner wrote the bill so unfortunately that's not in it.

desinerd wrote:

ISPs suck, period. But here's how I one up them - keep switching! All major ISPs have "introductory offers" for 6 or 12 months. Comcast comes out with best 12 month offers in summer. Get the service, switch to another ISP when intro period is over. It is a little bit of hassle, but I save about $400 a year just on internet, ~$1000 a year if I bundle services.

That's a great idea I'll have to try it... oh that's right, I only have one broadband provider where I live.

Seems to me that this bill is just fine. All it needs is one small little add-on.

Any privately built network in North Carolina must provide nondiscriminatory access to private communications service providers on a first-come, first-served basis to rights-of-way, poles, or conduits owned, leased, or operated by the company unless the facilities have insufficient capacity for the access and additional capacity cannot reasonably be added to the facilities.

Heck, this is supposed to level the playing field isn't it? So, if the government network must sell line access then so should any private network.

Last week, Avila called a meeting of city officials and several Big Telecom companies, including Time Warner and CenturyLink, partly to discuss exemption issues. To give readers an idea of just how far Avila is in Time Warner’s corner, minutes into the meeting, she turned it over to the lobbyist from Time Warner Cable for the duration.

So, the cable company can use the city's conduit, but the city can't use the cable company's? And the city must charge more for the service than its costs while the cable company can sell at a loss? That sounds perfectly fair to me!! /end sarcasm

I'll bet that in this scenario, the cable co. would still cap, and raise prices, claiming increasing costs and what-not.

ISPs suck, period. But here's how I one up them - keep switching! All major ISPs have "introductory offers" for 6 or 12 months. Comcast comes out with best 12 month offers in summer. Get the service, switch to another ISP when intro period is over. It is a little bit of hassle, but I save about $400 a year just on internet, ~$1000 a year if I bundle services.

Comcast in particular sucks (suck it Comcast) and I agree that ISPs in general suck, but not all. Here in Chattanooga EPB has been great. Bottom tier internet service speeds? 30/30 Mbps. Kinda beats the 'blazing speed' advertised above.

A commenter earlier remarked that they didn't much care for their video service and when they unsubscribed EPB didn't offer anything to keep them on as a customer. Not 'offering' special deals though is what a Utility does. Want water? Yes? Ok, here is water. No? Ok, no water. End of Story. Electricity is the same thing. It's not a public company which is vying for Max Profit.

After rolling out fiber Comcast actually got their act together, upgraded their service and equipment, and backed off their pricing structure. Really? Why now I wonder?

I'm really ready for an alternative to the contemporary Internet Service Provider setup. We really are in a situation where ISPs are out of touch with what the customers expect. I am sickened by their behavior towards their customers as of late.

I kind of wish there were an opportunity to create a private, regional Internet co-op that did not operate for profit. I think it would run all of the cable companies out of business...

Wow... this really shows the extent to which big business has purchased politicians. I've got a great idea -- this bill should be amended so that companies who provide internet services must provide them at cost. Sounds fair.

In Canada one of the political issues of late has been whether or not funding should be provided by the government to political parties. The Conservatives think they shouldn't get any public funding, and at first, being a taxpayer that seemed like a good idea. I'm now thinking it should be the other way around. Political parties/candidates campaigns should be solely funded by the government, and corporate/personal contributions should be banned.

From what I'm reading in this article, I'm not sure that the bill is all bad. All Time Warner seems to be asking for is a level playing field. The loss leader parts of the article fails to mention that government can't go out of business and as such could provide loss leading prices that Time Warner couldn't compete with if it wanted to. Time Warner can only loss lead prices for a finite amount of time before bankrupcy proceedings begin.

So TW seems to be asking that a price floor be set for government businesses so that it can compete. Since the price floor is fixed to costs, accounting gets thrown in the mix and we all know that government accounting isn't accountable to anyone. Time Warner on the other had is accountable to shareholders and to regulators. It seems to be asking for some standards for accounting so that it can compete. Not an unreasonable request when your competitor can regulate you out of business or legislate you out of business.

That's the real danger of government owned businesses. Private businesses fleeing the market because they cannot compete with tax subsidized government business that don't have to play by the same accounting rules. No bill is just as disasterous as an overreaching bill here and there has to be a middle ground that allows both parties to operate now and in the future.

This isn't because the muni fiber networks are somehow cheating, they are simply doing what most of the world is doing, investing in modern infrastructure and pricing it appropriately rather than pricing it to justify a multi-millionaire CEO and dividends for distant shareholders.

The bill is entirely bad, is meant to kill competition for TWC. Rep Avila pretended to be open to compromise from the TWC-written language, but then turned the meeting over to TWC reps who refused to compromise on most of it.

The question is whether we are talking about "business" or infrastructure. This is essential infrastructure and the idea that only private companies should be allowed to build it is absurd. TWC and other incumbents will continue to do just fine under current law, especially as most communities are unlikely to go to the trouble of building their own networks.

Government cares about its citizens. Corporations don't. They care about shareholders.Government doesn't really care about its citizens, but on some level they must because citizens vote for public officers. This is especially true at the local level for some reason of which I'm not aware.

The government will always lose money every year for around the first five years on its buildout (i.e. "loss leader"). They borrow money and use taxes to pay the interest. Many towns have rules that say the citizens must be allowed to vote on whether the city should be allowed to take out such a loan.

From what I'm reading in this article, I'm not sure that the bill is all bad. All Time Warner seems to be asking for is a level playing field. The loss leader parts of the article fails to mention that government can't go out of business and as such could provide loss leading prices that Time Warner couldn't compete with if it wanted to. Time Warner can only loss lead prices for a finite amount of time before bankrupcy proceedings begin.

So TW seems to be asking that a price floor be set for government businesses so that it can compete. Since the price floor is fixed to costs, accounting gets thrown in the mix and we all know that government accounting isn't accountable to anyone. Time Warner on the other had is accountable to shareholders and to regulators. It seems to be asking for some standards for accounting so that it can compete. Not an unreasonable request when your competitor can regulate you out of business or legislate you out of business.

That's the real danger of government owned businesses. Private businesses fleeing the market because they cannot compete with tax subsidized government business that don't have to play by the same accounting rules. No bill is just as disasterous as an overreaching bill here and there has to be a middle ground that allows both parties to operate now and in the future.

You realize we're talking about Time Warner Cable here. They'll do just fine. And if they die, good riddance.

Communications is a utility in this modern age. It's not a luxury anymore. Cable companies enjoy a practical monopoly since cities grant them exclusive access to public ways to build lines. And their practices to their customers thus far have been exactly what that of a monopoly would be like: predatory and abusive.

If there is to be a cable/internet monopoly -- and in most areas, there is -- then I'd rather it be run by an entity I can vote on rather than an entity whose sole loyalty is to its shareholders.

Capitalism only works if there's competition and cable companies have none.

Matthew Lasar / Matt writes for Ars Technica about media/technology history, intellectual property, the FCC, or the Internet in general. He teaches United States history and politics at the University of California at Santa Cruz.